I agree ... you should talk to someone locally about this mess you have.
Technically you can rent a property you don't own and can keep the income and report the expenses you pay for on it however since you don't own the property you cannot deduct the depreciation or the RE taxes or the mortgage interest so this is a big mess.
You as the owner cannot "rent" to the family member for nothing and take the expenses on the Sch E so you are both SOL.
